But despite the lackluster environment, the top managers still took home $14.4 billion in 2011.

Source: bwater.com

Ray Dalio, Founder, President & CIO at Bridgewater

Even when returns suffer, the largest hedge funds can collect big paychecks, thanks to the fees they charge pensions, endowments and wealthy individuals to manage money.

Paul Tudor Jones II charges a 4 percent management fee and takes 23 percent of any profit. So he made $175 million in 2011, although his main fund tracked the returns of the Standard & Poor’s 500-stock index. Steven A. Cohen, whose firm, SAC Capital Advisors, keeps 50 percent of the profit, earned $585 million.

“The industry’s fees and performance are so out of whack it’s unbelievable,” said Bradley H. Alford, who invested in hedge funds while he was at the Duke Endowment in the late 1990s but today oversees a lower cost mutual fund firm that competes with them. “Fifteen years ago, you got double-digit performance for those fees, but last year, the S.& P. was positive and hedge funds were negative. There’s no alignment with the fees.”

But the 10-figure payday is a rarer phenomenon. In 2010, six managers earned more than $1 billion, according to the annual ranking by AR Magazine, which tracks the hedge fund industry. John A. Paulson topped the list, taking home $5 billion.

Last year, only three managers hit the $1 billion mark. Ray Dalio, the enigmatic founder of Bridgewater Associates, seized the top spot, after his largest fund gained 16.05 percent last year. His payday: $3.9 billion.

In all, pay for the top 25 earners dropped by a third to the lowest level in three years. AR Magazine arrives at its figures by estimating money managers’ portions of fees along with the value of their personal stakes in the funds.

It all comes back to performance. In recent years, industry returns have been “uninspiring,” said Brad R. Balter at Balter Capital Management, as hedge fund strategies that have been “successful in the past aren’t working in these markets.”

The average hedge fund lost 5 percent in 2011, according to Hedge Fund Research Composite Index, which tracks nearly 2,000 portfolios. That compares with a 2 percent gain for S.&P. 500.

Strong returns account for the difference between a stratospheric payday and one that is just substantial.

Bridgewater’s gains — along with the firm’s hefty $120 billion in assets — catapulted two of Mr. Dalio’s lieutenants to this year’s top earners. Greg Jensen and Robert Prince each collected $425 million.

A relative newcomer, Chase Coleman, a protégé of hedge fund giant Julian Robertson, landed at No. 6 on the list, the magazine said. Mr. Coleman, 36, began his Tiger Global Fund in 2001, and earned $550 million last year, owing to bets on Internet companies like the Russian search engine Yandex. A spokeswoman for Tiger Global declined to comment.

Even longtime managers proved they can rack up big returns. The activist manager Carl C. Icahn, 76, was up 34.5 percent in 2011 and pocketed $2.5 billion.

“Some positions that we weren’t even in in the beginning of the year really paid off like El Paso and Chesapeake Energy,” Mr. Icahn said in an interview. “It was really fortuitous as we were really bearish and very hedged throughout the year.”

Some hedge fund managers on the list rebounded sharply after several years of weak performance.

The Renaissance Institutional Equities Fund was nearly shut down in 2009 after losing money for two consecutive years, the magazine said. Then the quantitative fund, which uses computer models to execute trades, came roaring back in 2011, gaining 34 percent.

A former chairman of Stony Brook University’s math department, James Simons, 73, handed over day-to-day duties at Renaissance to his co-chiefs, Peter Brown and Robert Mercer, in early 2010. But Mr. Simons’s personal stake in the Renaissance Fund put him at No. 3 on this year’s ranking with a payday of $2.1 billion. Mr. Brown and Mr. Mercer appeared lower on the list, each earning $125 million. A spokesman for Renaissance declined to comment.

TimSloan | AFP | Getty Images

John Alfred Paulson, president of Paulson & Co., Inc.

The comeback award goes to Kenneth C. Griffin. The head of the Chicago hedge fund Citadel landed at No. 4 on this year’s list after his two biggest funds nearly collapsed in 2008. It took three years for the funds to climb back to levels where they can charge their investors the lucrative performance fees. Last year, the funds were up more than 20 percent, allowing Mr. Griffin to pocket $700 million, the magazine said. A spokeswoman for Citadel declined to comment.

Others barely held on to their spots after weak returns.

Paul Singer of Elliott Management, which oversees $19.2 billion, made $125 million last year even though his funds gained 3.8 percent to 4.2 percent. Seth Klarman of the Baupost Group made $110 million even as his oldest funds returned 4.75 percent to 5 percent, the magazine said.

Of the top 25 earners of 2010, 15 did not make this year’s list. Among them: Appaloosa’s David Tepper, whose Palomino fund fell 3.33 percent, and Edward Lampert of ESL Partners, which plunged 12 percent on big losses from Sears Holdings. Mr. Tepper did not respond to requests for comment. A spokesman for ESL declined to comment.

Mr. Paulson — the $5 billion manager in 2010 — failed to make the list this time. One of his largest funds lost more than 50 percent, after bets on the economic recovery soured. A spokesman for Paulson declined to comment.